Money supply during FY06 expanded by Rs 398 billion or 13.4 percent compared with the targeted growth of Rs 380 billion or 12.8 percent. This was revealed in the final data released by the State Bank of Pakistan (SBP) on July 20 for the last week of the year.
The higher than targeted increase in money supply occurred mainly because of more than targeted utilisation of bank credit by the private sector and more than targeted accumulation of foreign assets of the banking system translated, in main, in the increase in country''s liquid foreign exchange reserves.
According to available details, the private sector credit increased by Rs 352 billion during the year against the targeted increase of Rs 330 billion.
The net foreign assets (NFA) of the banking system, on the other hand, posted an increase of Rs 41 billion as against the expected increase of Rs 15 billion only. The reasons of the increase in NFA may be traced to the successful floatation of dollar sovereign bonds and privatisation proceeds especially of the telecommunication giant, the PTCL.
The government also used the rupee proceeds or counterpart of this increase in foreign assets to finance its budgetary borrowings, which stood at Rs 94 billion or Rs 4 billion less than that provided in the Credit Plan for FY06- a factor which is also responsible for lower than projected growth of domestic credit, which at Rs 357 billion was Rs 8 billion less than the targeted growth of Rs 365 billion. (For more details please see ''Money Week'' appearing on Monday next).
(Report by research.dept@aaj.tv)